The Trade Deficit Is Up, But It’s Not Donald Trump’s Fault

Kevin Drum

For indispensable reporting on the coronavirus crisis, the election, and more, subscribe to the Mother Jones Daily newsletter.The New York Times reports on the trade deficit:
The U.S. trade deficit in goods and services continued to climb in August, growing 5.9 percent from the previous month to $67.1 billion, the highest monthly level since 2006, as American imports outpaced exports….The rising trade deficit comes at an inconvenient moment for the Trump administration, which is eager to declare victory on its trade agenda as the election approaches. Economists caution against using the trade deficit as a measure of the economy’s health, but President Trump views the figure as a measure of his success in rewriting trade deals in the United States’ favor.
Poor Donald. But just this once, I’ll defend him. The trade deficit, by definition, is equal to government savings plus personal savings. Because of the pandemic, the federal government is running a big deficit, so government savings are negative. Likewise, thanks to high unemployment, households have been eating into their savings since April, which means that personal savings aren’t rising to make up for this. This makes it inevitable that the trade deficit is going to increase.
So it’s not really Trump’s fault. Like nearly every economic indicator these days, the trade deficit has to be taken with a grain of salt thanks to government shutdowns caused by the COVID-19 pandemic.